News / Economy

    Egypt to Pay $1.5B in Arrears to Foreign Oil Firms

    People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
    People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
    Reuters
    Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes oil firms, hoping the announcement will revive confidence in an economy battered by nearly three years of political upheaval.
     
    Egyptian officials speaking at an investment conference also sought to ease mounting concerns over everything from legal uncertainty to the black market for foreign currency.
     
    “There is approval to pay $1.5 billion,” Prime Minister Hazem el-Beblawi told the gathering, designed to lure investment from Gulf Arab states and businessmen. He said the arrears had discouraged investment in the critical energy sector.
     
    The oil-producing countries rallied behind Egypt after the army ousted President Mohamed Morsi of the Muslim Brotherhood in July, pledging billions of dollar in financial support.
     
    Political uncertainty since a popular uprising ousted autocrat Hosni Mubarak in 2011 has frightened away tourists and investors, cutting tax revenues and foreign currency inflows.
     
    That has increased pressure on the government to get oil firms investing again in extraction and exploration and attract both Arab and Western investors.
     
    Egypt has repeatedly promised to repay arrears to the oil companies following Morsi's removal, which was welcomed by Gulf states fiercely opposed to the Muslim Brotherhood.
     
    Finance Minister Ahmed Galal, addressing the same conference, said the central bank would supply the dollars needed to pay the firms.
     
    Financial disclosures by firms including BP, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.
     
    In the week after the army takeover, Saudi Arabia, Kuwait, and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans and oil products.
     
    Now Egypt is hoping Gulf businessmen at the Cairo conference will also pump cash into the country, a U.S. ally which has a peace treaty with Israel and controls the Suez Canal.
     
    Investment Minister Osama Saleh told Reuters Egypt hoped to attract $4 billion-$5 billion in direct foreign investment in the year to the end of June 2014.
     
    Egyptian government officials speaking at the conference said the country was on track to implementing a political roadmap that will lead to free elections and bring stability.
     
    But authorities have not managed to bring calm to the streets, where Morsi supporters stage regular protests against what they call a military coup that has brought widespread human rights abuses.
     
    The government says the Brotherhood is a terrorist group and a threat to national security.
     
    Political support from Gulf states has helped Egypt withstand criticism from Western allies who have questioned the country's democratic credentials since the army takeover.
     
    “How many fish?”
     
    Central Bank Governor Hisham Ramez said he expected more Gulf aid, but had no figure in mind. “Actually, we're not only counting on aid. We're counting on investments to come in.”
     
    Asked if he anticipated more aid from Saudi Arabia, the biggest Gulf economy, finance minister Galal told Reuters: “I cannot tell beforehand. You go fishing, how many fish are you going to catch?”
     
    Egypt badly needs private capital. Foreign direct investment fell to $3 billion in the 2012/13 financial year, which ended in June, compared with more than $10 billion a few years ago.
     
    The United Arab Emirates appears especially enthusiastic for its companies to launch or resume projects in Egypt.
     
    An informed source close to major Abu Dhabi investment companies told Reuters nearly $5 billion had been committed in loans and investments over the last four months and there was still scope for further investment in Egypt.
     
    Kirill Dmitriev, CEO of the Russian Direct Investment Fund, a $10 billion Kremlin initiative, said he was encouraged by the UAE's presence at the conference.
     
    “We believe Egypt is becoming an attractive investment destination,” he told Reuters.
     
    UAE Minister of State Sultan Al Jaber said sectors under discussion include agriculture, oil, gas and renewable energy.
     
    “We can't today define the size of investments. This we consider the beginning of a new page,” he said.
     
    “The most important thing we'd like to see happen is the topic of the laws needed to assure investors and protect their capital ...”
     
    The government is preparing a law to reinforce the legal standing of past contracts with the state, Mohamed Abazeid, an adviser to Egypt's investment minister, told the conference.
     
    The business environment in Egypt has been clouded by court cases that have challenged past contracts concluded by the state. These have included rulings ordering the renationalising of public sector businesses sold off in the Mubarak era.
     
    Qatar, which supported the Muslim Brotherhood, has been reluctant to invest in Egypt since Morsi's overthrow.
     
    Although Gulf Arab support is vital, Egypt is under pressure to come up with a long-term plan to revive the economy.
     
    The army-installed government launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package this year after Gulf countries pledged aid.
     
    The economy grew a meager 2.2 percent in the year to June 30, far too slow to make an impact on youth unemployment estimated at over 20 percent. Beblawi said the government aimed for economic growth of 3.5 percent in the current fiscal year.
     
    In a boost to the government officials trying to sell Egypt to Gulf Arab investors, Egyptian tycoon Naguib Sawiris, whose family controls the Orascom corporate empire, said he would invest $1 billion in the country in the first quarter of 2014.
     
    He told Reuters the investment would focus on construction, real estate, agriculture and microfinance.
     
    But it will take more than one heavy hitter to fix Egypt's finances.
     
    The Egyptian pound is being propped up by central bank dollar sales, introduced a year ago to help counter a run on the currency as the plunge in foreign investment and tourism caused a sharp fall in foreign reserves.
     
    Reserves, which stood at $36 billion before Mubarak fell, have been under pressure ever since. They totalled $18.59 billion at the end of October and Ramez told the conference they had dipped slightly last month. The November figure is due soon.
     
    Ramez said the black market for the Egyptian pound  would “not last long”, as two market sources said the currency had weakened against the dollar because of importer demand.

    You May Like

    Water Scarcity Could Push Conflict, Migration by 2050

    Warning comes in a new report from the World Bank titled "High and Dry: Climate Change, Water and the Economy"

    What Your First Name Says About Who You Support for President

    Bobby, Betty and Curtis tend to support Donald Trump while people named Juan, Liz or Mohammad are more likely to lean toward Hillary Clinton

    South Pole Diary: In Round-the-clock Darkness, Radiant Moon Shines Like the Sun

    You hear more and see more when the moon first comes out; it’s your senses in overdrive, tuning into a new world.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Displaced By War, Syrian Artist Finds Inspiration Abroadi
    X
    May 02, 2016 1:36 PM
    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Ethiopia’s Drought Takes Toll on Children

    Ethiopia is dealing with its worst drought in decades, thanks to El Nino weather patterns. An estimated 10 million people urgently need food aid. Six million of them are children, whose development may be compromised without sufficient help, Marthe van der Wolf reports for VOA from the Metahara district.
    Video

    Video Little Havana - a Slice of Cuban Culture in Florida

    Hispanic culture permeates everything in Miami’s Little Havana area: elderly men playing dominoes as they discuss politics, cigar rollers deep at work, or Cuban exiles talking with presidential candidates at a Cuban coffee window. With the recent rapprochement between Cuba and United States, one can only expect stronger ties between South Florida and Cuba.
    Video

    Video California Republicans Weigh Presidential Choices Amid Protests

    Republican presidential candidates have been wooing local party leaders in California, a state that could be decisive in selecting the party's nominee for U.S. president. VOA's Mike O’Sullivan reports delegates to the California party convention have been evaluating choices, while front-runner Donald Trump drew hundreds of raucous protesters Friday.
    Video

    Video Kurdish Football Team Helps War-Torn City Cope

    With the conflict still raging across much of Turkey’s predominantly Kurdish southeast, between the rebel PKK and the Turkish state, many Kurds are trying to escape the turmoil by focusing on the success of their football team Amedspor in Diyarbakir. The club is increasingly becoming a symbol for Kurds, not only in Diyarbakir but beyond. Dorian Jones reports from southeast Turkey.
    Video

    Video ‘The Lights of Africa’ - Through the Eyes of 54 Artists

    An exhibition bringing together the work of 54 African artists, one from each country, is touring the continent after debuting at COP21 in Paris. Called "Lumières d'Afrique," the show centers on access to electricity and, more figuratively, ideas that enlighten. Emilie Iob reports from Abidjan, the exhibition's first stop.
    Video

    Video Pakistani School Helps Slum Kids

    Master Mohammad Ayub runs a makeshift school in a public park in Islamabad. Thousands of poor children have benefited from his services over the years, but, as VOA's Ayesha Tanzeem reports, roughly 25 million school-age youths don't get an education in Pakistan.
    Video

    Video Florida’s Weeki Wachee ‘Mermaids’ Make a Splash

    Since 1947, ‘mermaids’ have fascinated tourists at central Florida’s Weeki Wachee Springs State Park with their fluid movements and synchronized ballet. Performing underwater has its challenges, including cold temperatures and a steady current, as VOA’s Lin Yang and Joseph Mok report.
    Video

    Video Somali, African Union Forces Face Resurgent Al-Shabab

    The Islamic State terror group claimed its first attack in Somalia earlier this week, though the claim has not been verified by forces on the ground. Meanwhile, al-Shabab militants have stepped up their attacks as Somalia prepares for elections later this year. Henry Ridgwell reports there are growing frustrations among Somalia’s Western backers over the country’s slow progress in forming its own armed forces to establish security after 25 years of chaos.
    Video

    Video Documentary Tells Tale of Chernobyl Returnees

    Ukraine this week is marking the 30th anniversary of the world's worst nuclear accident, at the Chernobyl nuclear power plant. Soviet officials at first said little about the accident, but later evacuated a 2,600-square-kilometer "exclusion zone." Some people, though, came back. American directors Holly Morris and Anne Bogart created a documentary about this faithful and brave community. VOA's Tetiana Kharchenko reports from New York on "The Babushkas of Chernobyl." Carol Pearson narrates.
    Video

    Video Nigerians Feel Bite of Buhari Economic Policy

    Despite the global drop in the price of oil, Nigerian President Muhammadu Buhari has refused to allow the country's currency to devalue, leading to a shortage of foreign exchange. Chris Stein reports from Lagos businessmen and consumers are feeling the impact as the country deals with a severe fuel shortage.
    Video

    Video  Return to the Wild

    There’s a growing trend in the United States to let old or underused golf courses revert back to nature. But as Erika Celeste reports from one parcel in Grafton, Ohio, converting 39 hectares of land back to green space is a lot more complicated than just not mowing the fairway.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8700
    JPY
    USD
    106.56
    GBP
    USD
    0.6808
    CAD
    USD
    1.2518
    INR
    USD
    66.404

    Rates may not be current.